Corn export boom to China likely to soften by fall 2021
China is buying huge amounts of U.S. corn as it rebuilds its hog herd and recovers from the pandemic, but its appetite for imports could weaken by next fall, when U.S. farmers are expected to harvest their second-largest crop ever, said University of Illinois economists on Tuesday. Chinese imports of 13 million tonnes this year could taper to a still-large 10.5 million tonnes during the sales year that begins on September 1.
“China will import grain when it needs grain and when the market dictates,” said economist Joe Janzen. At the moment, imported corn costs less than domestically grown corn in China. The USDA estimates China will import 13 million tonnes of corn this marketing year, double last year’s amount. Some 11 million tonnes of U.S. corn have been sold for shipment to China since Sept 1.
During a webinar, Janzen said Chinese corn production could rise by 3% with a return to normal yields this year. That could reduce import needs to 10.5 million tonnes during 2021/22. “I think the United States gets some portion of that but not all of it,” he said. Ukraine, the dominant supplier, probably will rebound from a small crop this year and Brazil is “another potential competitor.”
Large Chinese purchases sparked a rally in corn and soybean futures prices that will prompt U.S. farmers to expand soybean plantings to 90.8 million acres, an increase of 7.7 million acres from 2020, while corn plantings dip to 90.9 million acres, a drop of 1.1 million acres, said economist Scott Irwin. “The market is screaming” for more soybeans, he said.
With normal weather and average yields, farmers would harvest 14.982 billion bushels of corn, the second-largest on record, and 4.54 billion bushels of soybeans, the biggest crop ever, said Irwin. Farm-gate prices would remain high, at $3.80 a bushel for corn and $10 a bushel for soybeans, due to strong demand by exporters, processors, and livestock feeders.
“I expect negative news in some way, shape, or form on biofuels and RFS to happen between now and Jan. 20,” when President-elect Biden takes office, said Irwin, who speculated the outgoing Trump administration might exempt some refineries from complying with the RFS or issue a general waiver. “Crude oil refiners are in the driver’s seat at the EPA under the Trump administration. I think it’s pretty clear they’re not going to be in a Biden administration. And I think that’s going to be good news on RFS implementation going forward.”
To watch a video of the farmdoc Daily webinar, click here.